Nivex Agricultural Investment registered sales of $180m in the first seven months of 2016—a decline of 10% compared to $200m achieved sales in the same period of 2015.
The company had targeted to increase its sales by 10%, chairperson Nabil Yakoub said. However, Egyptian products have met many obstacles on both the local and global level during the past period which resulted in a decline in the company’s results as of the end of the exporting season.
Nivex owns about 500 acres used for export cultivation. It rents out land owned by the Egyptian Armed Forces in order to meet demand. The company exports about 90% of its total production.
Yakoub explained that the drop in the export of agricultural crops this season came as a result of the decline in the value of the euro. This decline is in product revenues, not their volume. The increase in production requirements, as well as transportation costs and tourism slowdown, have all contributed to the decline in exports during the past season.
Egyptian companies will not be able to increase their prices abroad due to competition from products exported by Spain, Morocco, and Israel. Many companies will see a decline in sales this year, he added.
Yakoub said that some companies that deal with the European market will have to increase their exports in order to compensate for the poor revenues and to compete with other companies. However, the problems in Egypt will further hinder their production and exports.
He revealed that Egyptian agricultural crops, whether those to be sold locally or exported, are in trouble despite their strength as Egypt is mainly an agricultural country. Yakoub explained that the recent legislations, laws, and procedures are not in the favour of Egyptian produce.
The recent move by the government to reduce subsidies on electricity and petroleum products will increase the costs of producing agricultural crops, thus taking away from the sector’s ability to compete globally. He went on to explain that energy interferes with all production phases.
He noted that transportation is one of the main problems stemming from energy price hikes. The increase in production costs, including seeds, fertilisers, labour, crop collection and shipping to local markets, are considered some of the most prominent problems.
Yakoub said that the transportation problem represents 80% of the sector’s problems, especially after the recent price hikes and the upcoming hikes. The transportation problem is responsible for the decline, which led to many small companies exiting the sector.
He explained that the value of shipping goods by air increased by 33% last year, reaching $1,200 per tonne, compared to $900 previously. EgyptAir increased its shipping costs first, then all companies followed suit.
The fee for transporting produce via Armed Forces trucks by desert road has also increased from EGP 130 per container to a new high of EGP 580. Transportation car fees also increased from EGP 50 to EGP 500 after the National Company for Road Establishment and Development took over responsibility.
Yakoub said that the tourism slowdown is causing a decline in agricultural crop exports. Goods that are shipped by air were previously transported on return flights to European countries and other countries. When the number of tourists declined, the number of planes declined too, thus resulting in a reduction of the amount of agricultural crops exported by air.
Yakoub said that the new programme approved by the government to support exports should be sufficient to put exports on the road to development; however, a great deal of effort and cooperation among companies is necessary to open new markets.
He added that large countries and many Arab countries support their products in many ways. Morocco offers land through usufruct systems to investors for 99 years. Moreover, it subsidises the needs of production and shipping operations, and facilitates all difficult procedures from which the agricultural sector in Egypt is suffering. That is why Morocco was able to become a strong competitor globally in a short time.
He demanded the government put forth a comprehensive plan for developing the agricultural sector, and encouraging the private sector to invest more in order to help the advancement of exports.
“The quality of Egyptian products globally is high, but the price increase causes many markets to reject them,” he said.
Yakoub said that the crisis between Russia and Turkey does not necessarily mean that Egyptian exports to Moscow will be increased during the upcoming period, as the Egyptian market faces several obstacles with Russia in terms of financial transactions. Egyptian companies in the Russian market must obtain 90% of the shipment fees in advance, as part of their terms and conditions. This came about because many clients tended to drag their heels when paying on time.
Morocco has strongly directed its products towards Russia since last year and has an advantage over other competitors.
The government’s plan to increase exports of agricultural crops to Russia, which was announced at the beginning of 2016, may still be implementable despite the global challenges.
Moscow decided to stop importing from Ankara in the fourth quarter of 2015 when a Russian aircraft was taken down by Turkey after the latter accused the aircraft of breaching its borders with Syria.
In terms of opening new markets, Yakoub said that the African market is large but needs a realistic plan and clear targets for strong competition from countries like Senegal.
He explained that opening new markets is not a simple step when considering all obstacles—including the fact that agricultural quarantine departments often stipulate measures beyond the Egyptian market’s abilities.
East Asian markets can accommodate large amounts of citrus fruits and vegetables but require a strong transportation movement to ensure fast arrival and to increase competitive abilities.